City of Kent tax revenues up, expenses down | 2016 budget update

With city of Kent tax revenues up higher than projected and expenses down, it’s a bright budget picture this year.

The business and occupation (B&O) tax revenue will jump by about 15.4 percent this year to an estimated $7.5 million compared to city staff projections of $6.5 million going into 2016, according to city financial reports.

City staff projects sales tax revenue of $19.1 million this year for the general fund, about 3 percent higher than the budget forecast of $18.6 million going into the year.

Expenses by city departments look to be about $955,000 less than the initial 2016 budget.

“Revenues are up, expenses are down so we are on target to end the year in a better position than we had originally anticipated,” said Councilwoman Dana Ralph at the Aug. 16 City Council meeting. “So that is always good news and we have been hearing that month to month.”

The B&O income could end up even higher than $7.5 million when the city finance department presents its second quarter report with a more specific forecast to the council’s Operations Committee on Sept. 6.

City Finance Director Aaron BeMiller credited additional staff for the increase as well as a conservative revenue estimate coming into the year.

The council in 2014 approved four new positions at a cost of about $425,000 to staff the B&O program in an effort to boost tax revenues. The program began with two staff members in 2013 when the council adopted the tax to bring in more money for street repairs.

“When we added staff, we made a promise that if you give us more staff, we would collect an amount to more than cover the cost of staff and we are doing that,” BeMiller said to the council.

Councilman Dennis Higgins asked BeMiller why sales tax revenue has gone up so much and if he thought that revenue would continue to go up.

“The improvement of the economy is the driving force behind that,” BeMiller said. “The question about whether it’s sustainable is the million dollar question.”

Councilman Jim Berrios, who owns the Golden Steer restaurant on the East Hill, said he has plenty of confidence in the economy.

“From my experience based on what I’ve seen, having ridden tough economic times as a business owner, I would totally support the numbers you are sharing with us but I think they may be a little shy of the potential,” Berrios said to BeMiller about the revenue forecasts. “We had a good year last year and this year is looking pretty good from a retail standpoint. Talking to other business owners, the feeling is we are taking the uptick cautiously, but our valley floor is doing exceptionally well and this region is poised for some really good years in the next five to 10 years.”

City staff project general fund revenue to hit $90.4 million in 2016, 3.2 percent higher than the $87.6 million coming into the year. Expenditures are projected to be $88.2 million, a 1.1 percent decrease from estimates of $89.1 million entering 2016.

All those numbers add up to a general fund reserve balance of $14.7 million or 16.7 percent of the total general fund budget. The council has a policy to put aside at least 10 percent of the total budget. The council also sets aside $1.5 million in a contingency fund for unanticipated costs and another $425,000 in a strategic opportunity fund.

Mayor Suzette Cooke and her staff are in the process of figuring out the 2016-17 biennial budget to present to the council on Sept. 27. BeMiller told the council revenue projections look good for 2017, but requests by city department leaders to add as many as 14 full-time employees next year and four more in 2018 at an estimated cost of about $3.4 million would require looking at other revenue options yet to be determined.

The council will review Cooke’s budget proposal before adopting a budget in December.